Umbrella vs Limited Company: The 2026 Contractor's Guide
Most contractors pick umbrella without comparing. See what it's actually costing you.
Umbrella Company
Estimated annual take-home
£67,631
£5,636 / month
Limited Company
Estimated annual take-home
£73,064
£6,089 / month
Limited company puts an estimated £5,433 more in your pocket per year.
Estimates only, based on simplified 2026/27 UK tax rates — not financial advice. Your real numbers depend on your expenses, umbrella provider, and personal circumstances. Speak to an accountant before deciding.
Umbrella vs limited company, side by side
| Umbrella | Limited company | |
|---|---|---|
| Setup effort | None — join in a day | Register a company, open a bank account (a few days) |
| Ongoing admin | Minimal — payroll handled for you | Invoicing, VAT, accounts, confirmation statement |
| Expenses you can claim | Very limited | Wider range of allowable business expenses |
| IR35 exposure | None — you're taxed as an employee either way | Matters — status affects your take-home directly |
| Typical fees | ~£20–£30/week margin | ~£150–£200/month accountant, plus insurance |
| Who it suits | First contract, inside-IR35 roles, testing contracting | Outside-IR35, established contractors, longer-term plans |
Which one's right for you?
First contract, inside IR35
Umbrella
You're taxed like an employee either way, so skip the admin and go umbrella while you find your feet.
Established, outside IR35
Limited company
Outside-IR35 income through a limited company is materially more tax-efficient — the admin pays for itself.
Testing contracting before committing
Umbrella
No company to wind down if you go back to permanent work a few months later.
Common questions
Is a limited company worth the hassle?
Outside IR35, usually yes — the tax efficiency typically outweighs the admin once you're earning a reasonable day rate. Inside IR35, the tax treatment is similar to umbrella, so the extra admin often isn't worth it unless you have other reasons to run a company.
What if my next contract is inside IR35?
You can keep your limited company open and simply take that one engagement's pay through PAYE via the fee-payer, or use an umbrella for it — you don't have to close the company down for a single inside-IR35 contract.
How much does an accountant cost?
Typically £100–£200 a month for a contractor-specialist accountant, covering your annual accounts, corporation tax, VAT, and payroll. Factor this into the comparison — it's already reflected in the calculator above.
“I know where to look for my next contract. The structure made it easy to learn.”
“Started the new gig this week, going really well so far and feeling confident about all the business / Ltd company side of things too 🙌”
Ready to set your structure up properly?
The Confident Contractor course covers exactly this decision — Price: £750 + VAT (£900 total)